Cut Down On Unfunded Mandates, Part I

Next week, the House will likely vote on H.R. 4078, a reform package entitled “The Regulatory Freeze for Jobs Act of 2012.” One of the titles packaged therein is H.R. 373, the “Unfunded Mandates Information and Transparency Act of 2011.” H.R. 373, which I’ll call UMITA, is a bipartisan bill championed by Rep. Virginia Foxx (R-N.C.). The act is meant to close many of the loopholes in the Unfunded Mandate Reform Act, Congress’s last attempt to reform the practice of unfunded mandates.

Unfunded mandates are sneaky little tools that Congress can use to pass regulations without having to pay for them. Suppose Congress wants to enact a new job training program. It could pay for the program itself by increasing federal spending. Or, it could require businesses or the states to foot the bill, escaping any cost scrutiny.

Given the fact that this year’s budget has topped $1 trillion for each of the past four years, Congress is constantly trying to find ways to avoid adding to it. They could, you know, actually shrink the size and scope of the government, but that will never do for politicians. Instead, they pass the costs of their regulation on to businesses or the states, avoiding all the ugliness of spending money they don’t have.

What can be done about these unfunded mandates that burden state governments and private businesses alike? In 1995, Congress passed the Unfunded Mandate Reform Act (UMRA), theoretically meant to curb the practice. The Act passed 394-28 in the House, and sailed through the Senate, 91-9. But don’t get too excited about Congress’s willingness to contain itself. The legislation is mostly toothless. It allows Congress to feel good and pat themselves on the back without having to change their behavior much at all.

Unfunded mandates matter. They burden state governments and private businesses alike. Given today’s high deficits, Congress has a stronger incentive than ever to use them to mask its spending problem. The need for reform is urgent; the old Unfunded Mandate Reform Act turns out not to have been fully suited to the task, though this may have been by design. Rep. Foxx’s transparency reforms are not a cure-all, but they would shed needed light on unfunded mandates and improve accountability. As Justice Louis Brandeis observed, sunshine is a fine disinfectant.

Unfunded mandates burden state governments and private businesses alike. The need to update and reform UMRA is urgent. Stay tuned for my next post on how Rep. Foxx’s UMITA bill might go a long way in fixing a bad problem.